Two months after the EU referendum and it remains uncertain as to how and when the UK will leave the EU and what the UK’s future relationship with the EU will look like as a result of Brexit.  It seems increasingly likely that formal decisions may be delayed as the enormity and complexity of the task becomes more apparent and in light of other factors including national elections in France and Germany in 2017.  In the meantime, for many it is "business as usual" and Brown Rudnick remains committed to advising clients through this uncertain period with a focus on identifying opportunities.

We have set out below summaries of several key corporate law topics that companies and investors may wish to consider using to their advantage in the wake of the Referendum result.

1) ‘Flipping’ into a US legal structure - companies may consider 'flipping' their business into a US legal structure.  This will be of particular interest to the UK companies who want to commercialise their technology or products into the US or with aspirations to list on NASDAQ.  US investors are more likely to invest in US companies given (i) their familiarity with the market and the requisite legal structures, (ii) the prohibition within the internal rules of some US institutional investors from investing in non-US companies, and (iii) the exit opportunities in the US (whether by way of IPO or acquisition) may be more appealing to such investors. 

In order to implement the flip, the existing UK company will become a wholly-owned subsidiary of a new US incorporated company (usually achieved by the shareholders of the UK company exchanging their shares for shares in the new US parent company).  The US parent company is typically incorporated in Delaware, which remains the preferred US jurisdiction for both corporates and investors.  Once the new corporate structure is set up, operations may be commenced in the US through the Delaware company whilst UK operations continue under the same company now a wholly-owned subsidiary of the US entity.

It is important that any advantages of flipping into a US legal structure outweigh any potential disadvantages, and such potential disadvantages should be considered carefully.  The Brown Rudnick team, both in the UK and the US, is ready to advise on all aspects of carrying out a US flip. 

2) Denomination and redenomination of share capital – UK companies should be aware that shares are permitted to be denominated in any currency, and that different classes of shares may be denominated in different currencies.  For public companies, the exception is that the authorised minimum share capital requirement must initially be satisfied in either sterling or euros. 

Later stage UK companies that are limited by shares may also seek to redenominate their share capital (or any class of their share capital) by ordinary resolution, unless they are prohibited from doing so by their articles of association.

These structures may present opportunities to take advantage of, or hedge against, the devaluation of the Pound in the period following the Referendum result.

3) Denomination of funding rounds - UK private companies should also consider whether new funding rounds should be denominated in Pounds or another currency (for example, US dollars), particularly where those companies have operations in the US and the bulk of their costs are denominated in US dollars.  US dollar denominated fundraisings take advantage of a US dollar that is about 10% stronger against the Pound than it was immediately before the Referendum result.

Why Brown Rudnick's Corporate Team?

Across the USA, the UK and Europe, Brown Rudnick’s Corporate Team represents businesses at all stages of development, including start-ups, emerging growth companies, multi-national public companies, large institutional private businesses and state-owned entities and governments.  We represent and work closely with private equity, hedge and specialized funds, family offices and other non-institutional sources of capital.  Across a broad range of clients, industries and sectors, the Brown Rudnick Corporate Team has broad and deep expertise advising on complex cross-border transactions.  We get deals done around the world and we do those deals all the time - hundreds of deals worth billions of dollars and deal experience in more than 50 countries.  

In the blur of mega firms, Brown Rudnick stands out as a “global boutique” and has in place a multi-disciplinary, international Brexit Team. We are monitoring and analysing the consequences and considerations for businesses and are ready to advise on the potential legal implications of Brexit.  If you have any questions please call your usual contact at Brown Rudnick or one of the following lawyers:

About Brown Rudnick

BROWN RUDNICK LLP, an international law firm with offices in the United States and Europe, represents clients from around the world in high-stakes litigation, international arbitration and complex business transactions. Clients include public and private corporations, multinational Fortune 100 businesses and start-up enterprises. The Firm also represents investors, as well as official and ad hoc creditors’ committees in today’s largest corporate restructurings, both domestically and abroad. Founded more than 60 years ago, Brown Rudnick has over 230 lawyers providing advice and services across key areas of the law. Beyond the United States, the Firm regularly serves clients in Europe, the Middle East, North Africa, the Caribbean and Latin America. With its Brown Rudnick Center for the Public Interest, the Firm has created an innovative model combining its pro bono, charitable giving and community volunteer efforts.


Mark Dorff

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